United States Oil (USO) prices entering a bear market
Oil futures dropped Wednesday, with U.S. prices entering a bear market, as domestic data revealed a weekly crude supply climb of almost 7 million barrels—the largest in five weeks—to their highest level in nearly two years.
“Crude inventories are now at their highest since July 2017, up nearly 44 million barrels since mid-March,” said Matt Smith, director of commodity research at ClipperData.
West Texas Intermediate crude for July delivery CLN19, +0.21% lost $1.80, or 3.4%, to settle at $51.68 a barrel on the New York Mercantile Exchange. Prices for the front-month contract have settled 22% below the most recent high of $66.30 on April 23, according to Dow Jones Market Data. A bear market is marked by a drop of 20% or more from a recent high.
Front-month WTI contract prices settled at their lowest since mid-January.
U.S. oil prices have been falling for weeks on heightened concerns for the global economy and the tension between the U.S. and China, and now, Mexico, over tariffs that could potentially hurt energy demand.
“With the trade wars and if tariffs go through on Mexico next week we could continue to see a risk-off posture in the energy markets,” said Zahir. “Any rallies in crude oil at this point we feel will be short lived.”
“The bond market is taking center stage,” he added. If we continue to see strength in bond prices and lower yields, that “indicates to us [a] slower global economy and growth, which we feel will have a direct impact on crude oil demand.”
Along with watching stocks and the economy, traders have also been weighing expectations for the production-cut agreement between the Organization of the Petroleum Exporting Countries and their allies ahead of the deal’s expiration at the end of this month. The next OPEC meeting, which had been scheduled for June 25-26, may be postponed to early July at the request of Russia, according to some news reports.
Saudi Energy Minister Khalid al-Falih has called recent volatility “unwarranted” and has said he expects OPEC to help to stabilize prices beyond the end of the global output pact at the start of July. “We have previously stated our commitment to do whatever it takes to stabilize markets and we have delivered on those promises. And I am making that commitment again,” he said, according to recent reports.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 12.20.
The projected upper bound is: 11.43.
The projected lower bound is: 10.05.
The projected closing price is: 10.74.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 23 white candles and 26 black candles for a net of 3 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 10.6430. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 6 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 23.53. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 28 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -136.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 9 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 8 period(s) ago.
Rex Takasugi – TD Profile
UNTD ST OIL FUND closed down -0.390 at 10.770. Volume was 84% above average (neutral) and Bollinger Bands were 144% wider than normal.
Open High Low Close Volume___
11.010 11.020 10.530 10.770 41,599,348
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 11.73 12.81 12.62
Volatility: 48 36 39
Volume: 32,121,880 24,038,652 25,642,370
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
UNTD ST OIL FUND is currently 14.6% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on USO and have had this outlook for the last 22 periods. Our momentum oscillator is currently indicating that USO is currently in an oversold condition. The security price has set a new 14-period low while our momentum oscillator has not. This is a bullish divergence.
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